Approaching Retirement: Things to consider..

There are a number of important questions you should be asking yourself in the run up to retirement. Answering them now will make your transition into retirement as stress free, and enjoyable as possible… after all retirement is something you should look forward to.

We have acquired help from one of our advisers, Stuart Craig, an independent financial adviser with over 15 years of experience in retirement planning.

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Q1)When should I start considering my retirement options?

SC: There is no substitute for time whilst trying to achieve your desired retirement income. The earlier you start this process the better, as this will ensure that there’s no surprises come your retirement date.

There are a number of digital tools out there to get you thinking about how you will fare in retirement, Scottish Widows have a range of retirement calculators worth taking a look at. However, for an accurate and fully comprehensive overview of your finances it’s important to seek professional independent advice.

Q2)When should I get a pension forecast?

6- 9 months before retirement you should contact your current and previous pension providers to find out what your final pension will be, and how it will be paid to you.You can also get a State pension forecast on the governments dedicated pension site.

SC: “The state pension forecast is important however the government determine when this will be paid. As a result your other pension plans / investments can be the determining factor in whether it is possible for you to retire prior to receiving your state pension.

Q3)Should I consolidate my pensions?

Over the years you may have accumulated a number of workplace pensions, as you move from job to job during your career. Keeping track of all your pensions and their performance can prove difficult, a popular solution is to consolidate all your workplace and private pensions into one. Making it easier to asses’ performance, buy an annuity, go into drawdown and most importantly determine how much you are likely to have in retirement.

SC: “This is a very important consideration, penalties, hidden guaranteed growth and income features can result in your existing pension plan offering value in excess of any benefits offered via transfer. This is a major reason for consulting an independent financial adviser.

Q4)How much will I need in retirement?

SC: “Everyone’s envisaged retirement is different so it’s important to budget for your particular circumstances. Covering your existing expenditure can help identify what money is required in the future on a monthly basis, whilst also taking into account any larger scale life changes planned and the resulting impact on your income needs.

Standard life have their own digital tool designed to highlight how much you may need in retirement to be able to realise your dream retirement lifestyle.

Q5)Will I need to top up my pension income?

Having identified possible shortfalls, you may want to look at different ways of topping up your pension income. There are a range of possibilities, including maximising monthly contributions in the run up to retirement, starting a new scheme, or even getting company bonuses paid straight into your pension pot. If appropriate, you could also delay the date on which you would start taking your retirement income.

It’s not just your private pension that you can top up, four months out from reaching state pension age you will be asked if you plan on withdrawing your pension. Deferring will result in a larger amount when you do decide to retire. Your state pension would increase by 1% for every 9 weeks you defer, this works out at Just under 5.8% for every full year.

SC: Pareto we would establish the accessibility requirements for your savings, and introduce our independent mortgage adviser to ensure that repayment of existing debts is considered in the process.

Q6)Buy an Annuity or take income drawdown?

SC: This is an area best discussed in person after gathering your full financial details. There are a lot of issues to take into account which includes your attitude to investment risk, capacity for loss, income requirement, and wishes in relation to death benefits amongst many other factors, all of which would be covered during a full meeting.

Q7)Should I take a tax-free lump sum?

Often when taking your private or workplace pension you are given the option of taking out a cash free lump sum, to the maximum of 25%. Either taken from your pension pot, or your remaining lifetime allowance. You should always consider the impact on your pension pot, should you take the lump sum. Please note we would always recommend consulting your IFA before making your final decision.

SC: “Some people have earmarked any tax free lump sums, whereas other people may utilise these towards the retirement income. It’s an area that needs to be covered thoroughly as your circumstances may change, setting up the pension and your arrangements should offer some flexibility.

If you have any further questions, please don’t hesitate to contact Stuart directly.